Here are the main types of stocks you should know about: common stocks, preferred shares, large cap stocks, mid-cap stocks, small cap stocks, domestic stocks, international stocks, growing stocks. When people talk about stocks in general, they are most likely referring to this type. In fact, most of the shares issued are in this form. Basically, we reviewed the characteristics of common stock in the last section.
Common stock represents the ownership of a company and a claim (dividends) for a portion of the profits. Investors get one vote per share to elect board members, who oversee the main decisions made by management. In the long term, common stocks, through the growth of capital, produce higher returns than almost any other investment. This higher return comes at a cost, since common stock carries the greatest risk.
If a company goes bankrupt and is liquidated, common shareholders will not receive money until creditors, bondholders and preferred shareholders are paid. Preferred shares represent some degree of ownership in a company, but generally do not have the same voting rights. This may vary depending on the company. This is different from common stocks, which have variable dividends that are never guaranteed.
Another advantage is that, in the event of liquidation, preferred shareholders are liquidated before the common shareholder (but still after the debt holders). Preferred shares may also be enforceable, meaning that the company has the option to buy the shares from shareholders at any time and for any reason (usually in exchange for a premium). Income stocks are the least volatile stock classification and offer investors stable dividends. Most stocks with revenues come from large companies with limited room for growth, so much of the profits are paid to shareholders rather than reinvested in the company.
This generates higher dividends than most stocks offer and a fairly reliable income for investors. Income stocks are generally found in traditionally stable sectors, such as natural resources, food, energy, utilities, financial institutions, and real estate investment trusts. Many stocks with revenues are considered “front-line”, meaning they are issued by well-established companies with a long history of positive finance and consistent dividend payments. For example, a casino's shares would be classified into the consumer services industry, the travel and leisure supersector, the travel and leisure sector, and the gambling subsector.
Investors classify stocks according to the level of risk they present, such as growing stocks, speculative stocks, or defensive stocks. Investors make sense of the large number of stocks and data available to them by classifying them according to their characteristics, such as growth potential, price and industrial sector. The industrial ranking reference index is the classification system used by stock exchanges around the world. The Global Industry Rating Standard, developed by Morgan Stanley Capital International and Standard %26 Poor's, classifies stocks according to the company's main business activity into sectors, industry groups, industries and sub-industries.
To illustrate the operation of the system, the shares of a company that manufactures oil rigs and drilling equipment would be classified into the energy sector, the energy industry group, the energy equipment and services industry, and the oil and gas drilling subindustry. .